“The sharp turn in interest rates seen from late November until mid-February has had an impact on the Business Outlook survey,” Zollner said.
”Expected credit conditions and profitability have taken a hit and past activity has also seen a bit of a wobble. But with the RBNZ [Reserve Bank] having engineered an easing in monetary conditions last week, it will be interesting to see if these indicators stabilise next month.”
Inflation indicators were mixed.
The net percentage of firms expecting to raise prices in the next three months fell four points to 53%, giving up about half of last month’s jump, while the amount by which firms expect to raise prices eased from 2.1% to 2%.
Expected wage growth was rising, and the net percentage of firms expecting cost increases (79%) is the highest since July 2023, Zollner said.
Economic momentum continued to build.
“Reported past activity (the best indicator of GDP) remains high, though the volatile construction sector saw a sharp fall,” she said in the report.
“Reported past employment was mixed, higher for manufacturing but lower elsewhere.”
While reported past wage increases were flat, expected wage indicators were starting to turn higher as the labour market recovered, both in terms of the size of expected increases and the net percentage of firms expecting to raise their wages.
“Wage indicators will be key to watch, given the amount of migration churn that has occurred over the recession, which has made effective labour supply subject to more uncertainty than normal,” Zollner said.
Zollner noted a split in responses between those received after the Reserve Bank’s Monetary Policy Statement softened interest rate hike expectations.
“It’s important to note that the latter-month sample is always smaller and therefore more volatile, and for that reason, differences can only ever be suggestive,” she said.
“But for what it’s worth, in the late-month sample, some of the forward-looking indicators were a little higher, but the past activity indicators [were] a little weaker than in the responses from the very start of February.”
Westpac senior economist Michael Gordon noted that a net 23% of firms reported that their activity was up on the same time last year.
“While this measure was also lower compared to February, it has largely held on to the gains that we saw in late 2025,” Gordon said.
Liam Dann is business editor-at-large for the New Zealand Herald. He is a senior writer and columnist, and also presents and produces videos and podcasts. He joined the Herald in 2003.
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